China's official purchasing managers' index (PMI) rose to a 13-month high in April, signalling the economy has found a footing and may be quietly recovering from a first-quarter trough, but smaller factories are still struggling.
The pick-up in the PMI to 53.3 from 53.1 in March indicated a further expansion in the vast factory sector, although it was slightly below market expectations of 53.6. Readings above 50 signal expansion while those below 50 point to contraction.
The manufacturing output sub-index rose to 57.2 from 55.2 in March. However, the National Bureau of Statistics noted many important industries remained weak with index readings below 50, among them chemicals, equipment, cars and oil refining.
The improvement in manufacturing likely reflected restocking after a slow winter, said Ting Lu of Bank of America-Merrill Lynch.
He said infrastructure investment was recovering as the dust settled from a corruption scandal in the Ministry of Railroads and from bureaucratic reshuffling at the local government level.
Although new export orders edged up to 52.2 from 51.9 in March, the sub-index for all new orders slipped to 54.5 from 55.1, implying that domestic new orders remained weak.
Tight credit, especially for real estate developers and private firms, had helped push the Chinese economy to its weakest footing since the fall of 2008. But there are signs that the availability of loans is improving.
"Policymakers continue to grapple with the challenge of loosening enough to prevent a sharp slowdown, but not loosening too much and sparking an inflationary spiral," said Alastair Thornton, analyst at IHS Global Insight.
China's annual growth slowed to 8.1 per cent in the first quarter of 2012 from 8.9 per cent in the previous three months - the fifth consecutive quarter of slowdown in the world's second-largest economy.
While large-scale manufacturers continue to report growth, small firms remain in contraction, the statistics bureau said. The tight credit conditions have disproportionately hit smaller and private companies, as reflected in a survey of smaller factories by HSBC.
The HSBC Flash PMI, the earliest indicator of China's industrial activity, showed a stabilising economy last week. That index's reading of 49.1 for April came in below 50 for the sixth month in a row, reflecting a contraction in the factory sector, however the rate of deterioration slowed in a sign the economy may have bottomed out in the first quarter.
"Economic activity has started to recover but at a relatively slow pace," Capital Economics' analyst Qinwei Wang said in a note before the official data, citing an index of data the firm tracks.
Reuters
